PZ Cussons, the British-based consumer goods company, is facing considerable challenges in Africa, particularly due to foreign exchange issues related to the devaluation of the Nigerian naira, which has lost 70% of its value.
As part of its response, PZ Cussons has initiated plans to sell either partially or entirely its African subsidiaries, including its Nigerian business. The goal is to reduce exposure to currency fluctuations and mitigate the risks associated with operating in these volatile markets. In its report, PZ Cussons highlighted that it has made strides in advancing its strategic goals despite difficult economic conditions and is refocusing its portfolio to enhance competitiveness and maximize shareholder value.
This decision comes as part of a broader effort to realign the company’s operations amidst macroeconomic pressures.
PZ Cussons has been significantly impacted by the 70% devaluation of the Nigerian naira, which has had profound effects on its financial performance. The company highlighted a foreign exchange loss of £107.5 million, primarily due to USD-denominated liabilities in its Nigerian subsidiaries, a direct consequence of the naira’s sharp depreciation between May 2023 and May 2024. Despite this, PZ Cussons emphasized its commitment to serving Nigerian consumers, who are grappling with inflation and economic difficulties.
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To address these challenges, PZ Cussons has received several expressions of interest from potential buyers for its African business, recognizing the strength of its brands and the potential value in the market. This could lead to a partial or full sale of its African subsidiaries, as the company aims to mitigate risks associated with currency fluctuations and focus on more profitable markets. The favorable trends from the second half of FY24 have continued into the new financial year, and the company is also progressing with plans to sell St. Tropez, part of its strategy to streamline its portfolio.
In terms of its Nigerian subsidiary, PZ Cussons owns 73.27% of the business and, in September 2023, expressed interest in acquiring the remaining 26.73% minority shares at ₦21 per unit. Despite this, the Nigerian arm of the business has struggled financially, reporting a loss of ₦94.78 billion in the third quarter of 2023/24, a sharp contrast to the ₦11.213 billion gain in the same period the previous year. The company faced a ₦74.14 billion loss in the second quarter and continues to be in a negative net asset position, with liabilities exceeding assets by ₦46.42 billion, largely driven by the ongoing depreciation of the naira.
While PZ Cussons has seen significant improvement in its UK Personal Care business with double-digit revenue growth, its challenges in Nigeria underscore the broader economic and operational difficulties faced by the company in its African market.
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